Having perfected the art of using hype to move markets, VCs managed to hype their own rumors to collapse SVB, accidentally slaying a much loved accomplice

After more than a decade of venture capitalists insisting they provide more than just cash to their portfolio companies, the moment to prove that finally arrived.

Financial Times 2023-03-13 Sinead O'Sullivan

Context & Ripple Effects

The SVB episode exposed a contradiction in venture capital’s claim to offer operational support beyond funding: the same investor network that can coordinate startups also amplified withdrawal concerns. A related account attributes the bank’s vulnerability to management failures and weak risk discipline, not solely to investor behavior.

The subsequent response sharpened the distinction within the VC market, with solo investors and smaller firms providing hands-on help while many larger firms were reported to have disappointed founders. That makes the crisis a test of whether investors’ networks function as stabilizers or accelerants under stress.

First-order effects

SVB’s collapse immediately turned VCs’ communications with portfolio companies into a credibility issue, especially for firms that urged rapid action while presenting themselves as long-term partners.
Startups relying on SVB faced an urgent need for investor assistance, creating a visible contrast between smaller investors’ support and the reported response from larger VC firms.

Second-order effects

Large VC firms face pressure to formalize crisis support for portfolio companies, because informal network signaling can move founder behavior faster than bank-level risk assessments.
SVB’s failure shifts attention from startup financing alone to the operational resilience of the banking relationships that support venture-backed companies.

Third-order effects

If investor networks continue to act as both information channels and coordinated withdrawal mechanisms, venture capital’s value proposition will be judged increasingly on crisis governance rather than access to capital alone.
The episode points toward a more fragmented venture ecosystem in which founders weigh an investor’s practical support against the contagion risk of its public and private signaling.

The trend: Venture capital is being tested as an operating network: its ability to mobilize founders can provide emergency support or intensify financial stress.

Discussion

@jason @jason on x
YOU SHOULD BE ABSOLUTELY TERRIFIED RIGHT NOW — THAT IS THE PROPER REACTION TO A BANK RUN & CONTAGION @POTUS & @SecYellen MUST GET ON TV TOMORROW AND GUARANTEE ALL DEPOSITS UP TO $10M OR THIS WILL SPIRAL INTO CHAOS
@jason @jason on x
ON MONDAY 100,000 AMERICANS WILL BE LINED UP AT THEIR REGIONAL BANK DEMANDING THEIR MONEY — MOST WILL NOT GET IT THIS WENT FROM SILICON VALLEY INSIDERS ON THURSDAY TO THE MIDDLE CLASS ON SATURDAY — MAIN STREET FINDS OUT MONDAY https://twitter.com/...
@billackman Bill Ackman on x
This was not a bailout. During the GFC, the gov't injected taxpayer money in the form of preferred stock into banks. Bondholders were protected and shareholders were diluted to varying degrees. Taxpayer money was put at great risk. Many people who screwed up suffered minimal to..…
@carlquintanilla Carl Quintanilla on x
“.. Startups that didn't have business accounts at other banks sent their funds anywhere they could. ‘They were wiring to their law firms’ bank accounts and, get this, into the CEO's bank account,' ..” ⁦@WSJ⁩ $SIVB https://www.wsj.com/...
@evanhill Evan Hill on x
The learn to code VC genius types wiped out their own troubled but probably ultimately solid bank because they were all in a group chat together and panicked. https://twitter.com/...
@rachelensignwsj Rachel Louise Ensign on x
It was the first bank run ever organized over Slack. Our play-by-play of how VCs and start-ups yanked an extraordinary $42 billion from SVB in one day. https://www.wsj.com/... via @WSJ
@nic__carter @nic__carter on x
Far right and far left both delighting in the prospect of 60k businesses not making payroll next week: progressives because they hate tech and VC sector. Alt right because they consider SVB woke capital. both factions hate the status quo and want to “burn it all down”
@davidsacks David Sacks on x
We've reached a point of political division where it's fine to root for members of another tribe losing their bank deposits—even though you would protect members of your own tribe in the same situation. Be careful what you wish for because the shoe may soon be on the other foot.
@molly0xfff @molly0xfff on x
listen, it's just a little difficult to take seriously some of these VCs and execs who are panicking about SVB under the guise of being worried about the employees and the little guys https://twitter.com/...
@buccocapital BuccoCapital Guy on x
Mission accomplished https://twitter.com/...
@thestalwart Joe Weisenthal on x
A dimension to this story that we can't forget. Many of the leading folks in the industry that now wants Powell to step up and protect them spent the last 5 years telling lies and breeding cynicism about the Fed as pretext to sell cryptocurrencies to retail bagholders.
@jason @jason on x
Thank the Lord that our government was able to navigate this situation with only two banks going under — this was about to spiral out of control.
@andrewrsorkin Andrew Ross Sorkin on x
It is a bailout. Not like 2008. But it is a bailout of the venture capital community + their portfolio companies (their investments). That's the depositor base of SVB. It is the right thing to do in the moment, but there will be ramifications + new regs. VC's should say thank you
@chimeracoder @chimeracoder on x
This is wild. Particularly the part where he says “my friends and I coordinated a bank run” followed by “so then I bought shares of the bank thinking I could profit off the run”. https://twitter.com/...
@repthomasmassie Thomas Massie on x
Let's review the Federal Reserve Bank's many roles, & how each of them enabled the SVB failure/malfeasance: (1) Santa Claus. By keeping interest rates artificially low, FED stimulated the economy, & nudged those with capital into the VC space creating demand for a bank like SVB.
@paul_bowers @paul_bowers on x
Don't know about y'all, but my family has never had $250K in savings, so I think we're ok actually https://twitter.com/...
@lalehkhalili Laleh Khalili on x
My god. This guy is not only a venal, panicky dude dependent on a bailout from the government his libertarianism supposedly abhors, he also doesn't give a shit or know about the people he is yelling about. Otherwise he would have spent his own money covering payrolls. https://twi…
@bigblackjacobin Edward Ongweso Jr on x
it wasn't. you guys cried and screamed for four days because you didn't understand you were almost certainly going to be made whole, invoking hysteria about bank runs and feigning concern about workers https://twitter.com/...
@pt Parker on x
LOL, no. VCs aren't blaming each other for acting rationally. Is there a German word for being so anti-capitalist that you blame regulatory failures on markets, ironically making it less likely you get effective regulatory reforms of them evil markets. https://www.ft.com/... http…
@jason @jason on x
1. 2 banks collapsed in 48 hours 2. FED waited until before markets opened in Asia to announce a blanket backstop for all depositors 3. Downstream effects were instantly felt: payrolls systems, Etsy, etc It would have been 20 banks in a week & chaos if they did nothing
@vivekgramaswamy Vivek Ramaswamy on x
Puppet master now applauding the puppet. You spent all weekend stoking bank run fears in America to justify a bailout. SVB argued for lower risk limits because it supposedly wasn't “systemically important.” Now you argue the opposite. Pathetic hypocrisy. But congrats. It worked. …
@davidsacks David Sacks on x
Kudos to @RoKhanna. Every word of this is true. Decisive action is needed to protect the regional banking system. The run on other banks has already started. https://twitter.com/...
@antoniogm Antonio García Martínez on x
Well, now we all know who in the tech world we'd want to have in the post-shipwreck lifeboat and who we'd throw over the side.
@noahpinion Noah Smith on x
My next SVB post is going to be about this whole episode is a loss for the VC/startup industry. They think they've been saved and everything is back to normal; in fact, a minor financial disturbance (which they helped cause by tweeting panicky stuff) will cause them to be viewed.…
@maxkennerly Max Kennerly on x
.@nytimes, if you're quoting a VC saying Silicon Valley Bank was a “systemically important financial institution,” you should note that SVB lobbied to make sure it was not considered one, and nobody in the VC world said otherwise. https://www.nytimes.com/... https://theintercept.…
@divestech Dan Ives on x
Hearing from many startups and VCs we know well over the weekend around this SVB disaster. The damage done here is almost hard to comprehend for many of these tech startups that battled in this market and got funding and now locked out of their bank accounts with uncertain future
@devahaz Deva Hazarika on x
Plenty of dumb takes to go around on all sides, but the VCs yelling loudest about this SVB situation come off as hysterical people used to always getting what they want
@dannypage Danny Page on x
Glad that all these VCs & CEOs keep showing concern for the employees who might not get paid because of the SVB collapse. I eagerly await their efforts to also make the social safety net better and embrace Universal Healthcare.
@nickcho Nick Cho on x
Some say the SVB collapse is about greedy VCs who brought this upon themselves, while others say it's about middle-class ppl & small biz owners who deserve sympathy. There are other takes as well. Why is it that we can't seem to acknowledge that it's all of those at once?
@epicureandeal Ted on x
Kudos, by the way, to the VCs who are advancing short term 0%, no-terms loans to their portfolio companies (and not their portfolio cos?: Sam Altman) to make payroll until SVB depositors' money is released. That's the right way to handle this kind of crisis.
@epicureandeal Ted on x
I do feel sorry for my partners in the tech banking group. They're undoubtedly having a lot of very emotional, irrational, and unproductive conversations with their clients this weekend about what they can (can't) do to save them. 🧐 https://twitter.com/...
@jspujji Jesse Pujji on x
I hope this isn't true but I've heard from a few places that several cross over funds shorted SVB then started the panic/told their portcos and other VCs to pull $ from the bank.
@espiers Elizabeth Spiers on x
Yes, it does. Retail investors are not worried that the FDIC won't insure deposits up to 250k. SVB's risk was concentrated almost exclusively in the tech sector—and partly because top tier VCs insisted their portfolio companies use them for banking. https://twitter.com/...
@gritgrowthcap @gritgrowthcap on x
The sad reality is that this SVB debacle happened primarily because VCs specialize in passing the bag - and thus are deeply fearful of being caught holding it
@jbarro Josh Barro on x
VCs believing they caused the SVB bailout by whining on Twitter and Elon being willing to pay $44 billion for Twitter are related phenomena
@bigmeaninternet Malcolm Harris on x
Interesting that no one in Silicon Valley had the juice to get everyone together and solve this thing without the government. Capital is not sending its best.
@verashokina Vera Shokina on x
This is a great initiative by VC3 DAO, a community of VCs many of who I have known personally for many many years. They started fundraisign campaign. You can buy NFT or become an accredited investor. The funds will be used to support SVB or affected startups. https://twitter.com/…
@gumby4christ @gumby4christ on x
The “systemic risk” of SVB as I see it is this: VCs were requiring startups to bank with SVB, so if companies were to lose their deposits (over $250k), they'd have pretty legit causes of action against those VCs. Bailing out SVB means protecting VCs from death by 1,000 lawsuits.
@ddayen David Dayen on x
VCs *required* that all money from its startups be placed at SVB. I don't know the reason—that needs more reporting. But ICS doesn't appear to have been an option, though it seems SVB had the functionality (it either wasn't advertised much, or actively discouraged by VCs)
@vivekgramaswamy Vivek Ramaswamy on x
There's something very ugly happening right now: VCs & startup execs who stand to lose their deposits at SVB are going *out of their way* to push a narrative that there'll be a bank run on Monday if SVB depositors aren't bailed out by the government. They're yelling fire in the..…
@pwnallthethings @pwnallthethings on x
VCs suddenly having great concern over employees potentially losing out in SVB would have a bit more credibility if they hadn't been collectively going out of their way to organise mass layoffs since Jan
@katienotopoulos Katie Notopoulos on x
There should be no mercy for fatcat VCs and techbros! *taps earpiece* whats that? BuzzFeed banked at SVB? I call on Biden and Congress to bailout the bank immediately and uh make sure I get my paycheck on the 15th
@nicoleperlroth @nicoleperlroth on x
Silicon Valley law firms are now making lists of individuals who resigned from boards last week, because they didn't want to get stuck with the liability, and VCs who catalyzed SVB's bank run, so they can advise clients to never do business with those people/firms again. Good. ht…
@smtuffy Sean Tuffy on x
A handy rule of thumb for dealing with the SVB discourse is to assume all the VCs are engaging in bad faith and are being deliberately misleading, if not outright lying
@chrismohney Chris Mohney on x
people thinking Peter Thiel should be ashamed by insitgating a bank run and consequent financial carnage need to understand he's the kind of guy who would somehow find a way to make the trolley problem train kill everyone on both tracks
@leehepner Lee Hepner on x
Potential theory of liability if SVB and VCs compelled startups into exclusive banking at SVB in exchange for VCs receiving favorable mortgage and other lending rates. https://twitter.com/...
@davidsacks David Sacks on x
The problems in our banking system aren't over. They're just getting started. But at least now we have some amount of time to deal with them. (H/t @balajis) https://twitter.com/...
@danteatkins @danteatkins on x
These VC genius types are a grotesque combination of full of themselves and amazingly stupid that I want them to suffer. The moron Evan is quote tweeting literally bought shares of SVB DURING THE MIDDLE OF THE BANK RUN because he thought he was getting a great deal. Idiot. https:…
@galois_capital @galois_capital on x
Jason, I will make you a deal. FDIC guarantees up to $5m per account at all banks going forward, but not including SVB depositors. Contagion stops, but SVB depositors take full haircut. Also, FTX victims get 50% bailout. Deal? https://twitter.com/...
@mattbinder Matt Binder on x
perhaps the VCs screaming about how the government should step in and save them after SVB's collapse should just try getting a second job? https://twitter.com/...
@adamjohnsonnyc Adam H. Johnson on x
this punitive asshole spends years hyping every petty crime in California demanding prison time for shoplifting, dumping millions into recalling reform prosecutors then gets ratio'd on Twitter for 48hrs and has the gall to play the “why is everyone such a meanie” card. https://tw…
@hoofnagle Chris Hoofnagle on x
“...consider that VC has pumped and dumped nearly every industry it could get its hands on over the past decade. Now, with crypto exiting the market stage left, there is only one industry remaining to “disrupt”: venture capital itself. Even if https://www.ft.com/...... https://tw…
@carnage4life Dare Obasanjo on x
The hard part in finding a buyer for Silicon Valley Bank won't be one that will make depositors whole after sale of SVB's assets. It's having to take on the entitled VC and founder class as customers who then expect the finance version of backrubs in the office & catered lunches.…
@mclendaniel Morgan Clendaniel on x
One thing I'm confused about from some VC rhetoric When high interest rates lead to SVB collapse and that's going to cause tens of thousands of layoffs, that's bad. But when high interest rates led big tech to lay off tens of thousands, that was good because they were bloated?
@mattdpearce Matt Pearce on x
I was curious how it came to pass that the leaders in Silicon Valley, after four decades of partnership with SVB, organized themselves to eradicate their own longtime bank practically overnight, but this gives me a taste. Thank you. https://twitter.com/...
@carnage4life Dare Obasanjo on x
Between crypto and SVB, we've learned that the job of a VC is to wire rich people's money to startups but they don't understand how money or banks work. But at least we can trust them to discern which are the right technology ideas to invest in. Right? 🤦🏾‍♂️
@rohunjauhar @rohunjauhar on x
1 man saved the economy this weekend. thank you @Jason https://twitter.com/...
@davidsacks David Sacks on x
When do all the angry recriminations start over the “bailout” of Signature Bank depositors? What's the matter, Twitter mob, cat got your tongue? https://twitter.com/...
@thelincoln Lincoln Michel on x
Last week: “lmao sux 2 b a peasant but our AI start ups are going to replace every job ha ha learn to code worm 🤑” This week: “You have to bail out our Silicon Valley start ups how can you be so ungrateful for all we've done for you??? 😭”
@carnage4life Dare Obasanjo on x
“If the government doesn't bail out SVB, I'll withdraw my money from every bank and store it under my mattress. That'll show them.” - VCs https://twitter.com/...
@f_j_j_ Francis Jervis on x
This tweet is going to age like fine piss https://twitter.com/...
@poordart @poordart on x
Imajin being a crypto startup in 2023, but so uninspired by the idea of crypto that you dont hold at least some funds in ETH and BTC in a multi-sig And imajn being a VC investing in such a project ... just for them to lose your money in FTX/SVB/some stable farm lmwo Gross https:/…
@sineados1 @sineados1 on x
My latest on SVB, in the FT: https://twitter.com/...
@bigblackjacobin Edward Ongweso Jr on x
Are VCs just pretending they don't know how the FDIC works or are they actually this stupid? https://twitter.com/...
@silvermanjacob Jacob Silverman on x
This is ridiculous. The loudest voices of panic are coming from the VC class whose fortune is connected to SVB — and who may have helped start this bank run! https://twitter.com/...
@alexroy144 Alex Roy on x
Lessons of SVB so far: 1) Being a VC ≠ good leadership qualities. Most VCs are followers. 2) Leadership doesn't necessarily translate across verticals/disciplines. 3) Having a large audience ≠ courage. 4) Wisdom = knowing when to STFU Let's grow this list.
@mattyglesias Matthew Yglesias on x
The issue with SVB is that the VC and startup communities and their social peers all clustered into this one bank to the point where it became awkwardly sized and the list of feasible buyers is very short. It's not bias or politics that makes it hard. It's just size.

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